Philex Mining Operations at Padcal Mine to Remain Suspended

Philex was able to stop the discharge in less than forty eight (48) hours.

The water and sediment from its tailings pond are non-toxic and biodegradable. No injuries or fatalities have been reported to-date as a result of the incident. Philex is working closely with its stakeholders, the affected communities and local governments. Further, Philex is currently engaging domestic and foreign consultants to develop a rehabilitation plan to ensure the safety and integrity of the tailings pond facility, and an environmental program that will address any environmental impact which may have been brought about by the incident.

While the rehabilitation plan is being arranged and implemented, maintaining the suspension of mining operations is expected to cost P220 million per month. After recording operating revenue of P7.472 billion in the first half of 2012 – the second-best level after 2011’s record high in the half-century history of Philex – the Company is confident it has the financial resources to assess and repair the tailings pond despite mining revenues being suspended. The Company reported Core Net Income of Pesos P2.109 billion in the first half of 2012.

However, full-year earnings for 2012 will be reduced by the continued suspension. The final impact on this year’s earnings will be appreciated after a program to rehabilitate Padcal's tailings disposal system is developed and implemented, a process which could take sometime. A similar restoration plan needs to be established to consider any possible effect on the environment.

The Company has insurance that would mitigate the loss of revenues resulting from the suspension of operations and the cost of addressing any environmental impact which may have been brought about by the incident.

"The Board of Directors have taken the prudential but painful step of maintaining the suspension of the Company’s operations until such time as the appropriate rehabilitation and restoration plans have been composed and approved. Shareholders should be aware that the full-year earnings of Philex will be materially impacted,” stated MV Pangilinan, Philex Chairman.

The Company is also taking the precautionary measure of unwinding its hedges as a result of the suspension of its mining operations. The Company will realize a gain of approximately US$6.1 million from unwinding these hedges. As soon as operations resume, Philex will enter into new hedging arrangements.

"We have stopped mining operations since 1st August and they will remain suspended while we investigate the cause of the accident and rectify damage to our tailings pond,” said Philex President and Chief Operating Office Eulalio B. Austin Jr. "We expect this will take some time to accomplish, but we will move forward with all deliberate speed.”

Philex will update stakeholders on the situation as further information becomes available.

Philex Mining Corporation was incorporated in the Philippines in 1955 and is listed in the Philippine Stock Exchange. The Company, Philex Gold Philippines, Inc. (PGPI, a wholly-owned subsidiary through a holding company and incorporated in the Philippines), and Silangan Mindanao Exploration Co., Inc. (SMECI, a wholly-owned subsidiary through a holding company and PGPI, and incorporated in the Philippines) and its subsidiary, Silangan Mindanao Mining Co., Inc. (SMMCI) are primarily engaged in large-scale exploration, development and utilization of mineral resources. The Company operates the Padcal Mine in Benguet. PGPI operated the Bulawan mine in Negros Occidental until the second quarter of 2002. SMECI, through SMMCI, owns the Silangan Project covering the Boyongan and Bayugo deposits which are currently under the prefeasibility stage.